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How Much Does It Cost To Sell On Amazon?

how-much-does-it-cost-to-sell-on-amazon?

Many assume that selling on an e-commerce giant like Amazon must carry a hefty price tag. But is that the case? Here’s what you need to know about how much it costs to sell on Amazon.

Different Ways To Sell on Amazon

When you want to become an Amazon seller, there are two different selling plans: an Individual Plan and a Professional Plan. Here’s what you need to know about each option so that you can make an informed choice:

Individual Plan

The Amazon Individual Seller plan is cost-effective for sellers starting out or with a low sales volume. With this plan, you pay a flat fee of $0.99 for each item sold, in addition to applicable referral fees and variable closing fees. There are no monthly subscription fees, making it an attractive choice for those testing the waters or selling fewer than 40 items monthly.

One of the key benefits of the Individual plan is that it allows you to add new products to the Amazon catalog. This means you can list items other sellers do not sell on Amazon. However, Individual sellers are restricted from selling in categories like automotive parts, collectible coins, and fine art.

Another advantage is that Individual sellers can utilize Fulfillment by Amazon (FBA) if desired. With FBA, you send your inventory to Amazon's fulfillment centers, and they handle the storage, packing, shipping, customer service, and returns on your behalf. This gives you access to Amazon's world-class logistics network without managing the fulfillment process. FBA also makes your products eligible for Prime shipping, increasing their appeal to Amazon's most loyal customers.

The individual plan has some limitations compared to the professional plan. You will need access to advanced selling tools like bulk listing and reporting, setting your shipping rates, and running promotions. You also won't be eligible for the Buy Box, the featured offer on a product detail page.

The Amazon Individual Seller plan best suits casual sellers or those just starting. It provides a low-cost, low-risk way to begin selling on Amazon and test product ideas. As your sales grow, you can always upgrade to the Professional plan to access more robust features. With careful consideration of your selling goals and volume, the Individual plan can effectively launch your Amazon business.

Professional Plan

The Amazon Professional Seller plan is a comprehensive solution for businesses looking to scale their operations and take full advantage of the platform's advanced features. At a flat monthly fee of $39.99, this plan offers sellers unlimited product listings without additional per-item fees. While the monthly subscription cost is higher than the Individual plan, it can be more cost-effective for sellers with high sales volumes.

One of the key benefits of the Professional plan is the ability to add new products to the Amazon catalog. This allows sellers to expand their product offerings and reach new customers. Additionally, Professional sellers can utilize Fulfillment by Amazon (FBA), which grants access to Amazon's world-class logistics network. With FBA, sellers can streamline their operations by leveraging Amazon's storage, packing, shipping, and customer service capabilities.

The Professional plan unlocks a wide range of advanced selling tools and opportunities. Sellers can apply to sell in additional categories, including restricted ones, opening up new market possibilities. The plan also enables bulk listing creation, making it easier to manage large product catalogs. Advanced inventory management tools like feeds, spreadsheets, and reports help sellers optimize their stock levels and avoid overselling.

Professional sellers are eligible for top placement on product detail pages, increasing their visibility to potential customers. The plan also provides access to Amazon's API, allowing for seamless integration with third-party tools and enabling automation of various selling processes. Sellers can set their shipping fees for non-media products, offering greater control over pricing and profitability.

The Professional plan includes powerful marketing tools to help sellers grow their business. On-site advertising options like Sponsored Products and Sponsored Brands allow sellers to promote their listings and drive targeted traffic. Sellers can also run promotions, including free shipping, to attract customers and boost sales. Adding multiple users to the seller account facilitates collaboration and delegation of responsibilities within a business.

This plan is ideal for sellers who consistently sell more than 40 items per month or aim to scale their business rapidly. It is also well-suited for sellers looking to expand into restricted categories or leverage advanced selling tools and reports. Programs like Amazon Launchpad, which supports innovative startups, and Amazon Handmade, which caters to artisans and crafters, are exclusive to Professional sellers.

The Amazon Professional Seller plan empowers businesses with unlimited listings, advanced selling tools, and extensive marketing opportunities. While it comes with a monthly subscription fee, the plan's robust features and growth potential make it an attractive choice of severe sellers aiming to establish a strong presence on the platform and scale their operations efficiently.

How Much Does It Cost To Sell on Amazon?

When selling on Amazon, it's essential to have a clear understanding of the various fees associated with the platform. In addition to the two different selling plans, Amazon charges referral and fulfillment fees, which can impact your overall costs. Knowing these fees upfront can help you better calculate your profits and make informed decisions about your advertising strategy. It's important to note that these fees are subject to change at any time, at Amazon's discretion.

1. Referral Fees

Amazon charges referral fees on top of the base selling plan rate for each sale made. Also known as RFs, these fees vary depending on the category and are based on the total sale price, equal to the item price + shipping cost + gift wrapping, if applicable.

2. Fulfillment Fees

In addition to referral fees, there are also fulfillment fees based on the weights and dimensions of your products. With Fulfillment by Amazon or FBA, these costs include picking and packing your orders, shipping and handling, customer service, and product returns.

On the other hand, if you choose to forgo FBA and fulfill orders yourself, Amazon charges shipping rates based on the product category and shipping service selected by the customer and then provides you a shipping credit in the corresponding amount. Individual Amazon users cannot set their shipping fees and must use Amazon’s set shipping rates for all products.

Professional Amazon users can set their shipping fees, except for books, music, videos, and DVDs.

3. Other Costs

If you’re using FBA services, you may also have to pay storage fees. For storage from January to September, the storage fee for standard-size items is $0.75 per cubic foot, and the storage fee for oversized items is $0.48 per cubic foot. For storage from October to December, the storage fee for standard-size items is $2.40 per cubic foot, and the storage fee for oversized items is $1.20 per cubic foot. Amazon may charge additional storage fees for products classified as dangerous goods and long-term storage fees for units stored in an Amazon fulfillment center for more than 365 days.

Amazon charges a $5.00 rental book service fee for textbook rentals. It also charges $0.005 per eligible item for active non-media listings that have not sold in 12 months. However, the fee is waived for the first 100,000 listings.

For returns, Amazon charges a refund administration fee that’s the lesser of $5.00 or 20% of the original referral fee.

4. Adding It Up

Since Amazon’s fees aren’t very straightforward, it can be challenging to figure out exactly how much it will cost for you to sell on this platform and if it’s profitable. Here are some examples to help you add everything up:

  • Let’s say you sell within the clothing and accessories category. Your item costs you $5.00, and you list it for $20.00. With self-fulfillment and a $3.00 shipping cost, you have an $11.09 margin per sale considering the $3.91 referral fee.
  • Let’s say that you sell within the toys and games product category. Your item costs you $10.00, and you list it for $30.00. With FBA, you have an $11.86 margin per sale, taking into account the $4.50 referral fee and the $3.64 FBA fee.
  • Let’s say that you sell within the furniture and decor product category. Your item costs you $50.00, and you list it for $200.00. With FBA, you have an $82.93 margin per sale, considering the $30.00 referral fee and the $37.07 FBA fee.

Why Sell on Amazon?

Now that you know more about the costs of selling on Amazon, it’s essential to discuss the benefits.

  • Accessible: Start-up costs are a massive barrier to entry within the retail space. When you sell on Amazon, you minimize your start-up costs. If you're using the self-fulfillment approach, all you need is an Amazon account, products to sell, and tools.
  • Reach: Selling on Amazon gives you access to 300 million active users. Of those 300 million, 200 million are Amazon Prime members. In 2020, Amazon generated $404.4 billion in global retail sales ($386 billion net profit).
  • Loyalty: Amazon doesn’t just have hundreds of millions of casual users. Instead, it has hundreds of millions of loyal and frequent users. For instance, Amazon Prime members spend an average of $1,400 annually on the platform.
  • Competition: While Amazon may have a lot of competition, the platform offers a pretty level playing field that allows smaller companies to better compete with larger companies that would be hard to beat in a traditional retail space.
  • Customer service: Amazon offers top-notch customer service to help retain its loyal customer base. Amazon troubleshoots shipping issues and also provides quick refunds and easy returns.

How To Sell on Amazon

Even though it may seem like selling on Amazon is easy, success on this platform isn’t a given. Here are some tips to help you effectively sell on Amazon:

  • Set the right prices: Customers can easily find the lowest price on Amazon, so you can compete with other sellers by offering competitive pricing.
  • Show off your products: It can be risky to buy products online without seeing them first, which is why product images and details are so important on Amazon. Take professional photos of your products from all angles and include essential information, such as dimensions and materials.
  • Earn social proof: Since buying online can be risky, buyers often look to reviews to ensure the product is worth purchasing. Follow up with your customers and ask them to leave a review.
  • Market your products: If you want a real leg up on the competition, you should consider advertising on Amazon. With your products at the top of the page, customers will be more likely to purchase them.
  • Use Amazon Demand Side Platform (DSP): Amazon DSP is a demand-side platform that enables advertisers to buy display, video, and audio ads on and off Amazon. It’s a great tool for marketers of all sizes, but it’s most helpful to brands that sell primarily on Amazon and want to reach a broader audience.

Final Thoughts on Selling on Amazon

Now that you know how much it costs to sell on Amazon, it’s time to start! If you want the best results on this revenue-generating platform, you need the best marketing team to help you promote your products. MuteSix is an experienced Amazon ad agency that can help you optimize your ad spending to maximize category market share. Reach out today for a free marketing consultation!

Sources:

Challenges and Tips for New Amazon Sellers | The Balance

Selling on Amazon in 2021: Is It Still Profitable? | LinkedIn

Thinking of Selling on Amazon Marketplace? Here Are the Pros and Cons | Forbes

 

Special thanks to our friends at MuteSix for their insights on this topic.
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